28 January, 2020

EU connectivity is becoming faster and more intelligent, but more investment is needed

Brussels, 28 January 2020 – 5G and fibre are becoming a reality in Europe and there is a major opportunity for launching European AI and data-based services. Telcos will be a major lever for growth and inclusion across the digital ecosystem. However, telecom markets remain relatively weak in Europe, which means that policy action is needed to boost investment in networks and make the Continent globally competitive. These are some of the key findings of the 2020 “State of Digital Communications” Report, launched today by ETNO, Europe’s leading telecoms association, and prepared by leading research firm Analysys Mason.

5G and fibre are happening, European internet becomes faster

European telcos are bringing the Gigabit Society to light, empowering users across EU regions. The report finds that telcos had launched 20 5G networks in 9 European countries in 2019, while 80 networks are expected to be in operation by the end of 2020. In this context, network sharing appears to be a major tool to speed up 5G roll-out, with many European countries having already between 1 and 3 network sharing agreements. On the fibre side, roll-out is increasing across the region, with 41 million households reached by FTTP in 2019, up from 34 the previous year.

Telecom is Europe’s top tech business, but we need better investment conditions

The telecom sector also topped the Forbes Digital 100 Index: of the 17 Europe-based brands, 11 are either telecom operators or telecom equipment manufacturers – and half of them are ETNO members. This is reflected in the value added coming from ETNO companies, which is estimated in €136.9bn/year and captures their indirect socio-economic contribution.

What is more, the total investment in European telecom networks reached €48.6bn/year, with ETNO companies contributing to 70.5% of the total. Compared to global peers, European telcos also have the highest proportion of revenues dedicated to investment (capital intensity). However, European telecom markets remain weaker than global peers, with European investment per capita at €89 per person, as opposed to €213 in the US or €191 in Japan. This reflects, among others, factors such as weaker demand, market fragmentation and lower prices.

Networks are becoming greener, carbon intensity is going down

While the road to zero impact is still uphill, there are good news on the sustainability side. The carbon intensity of ETNO companies decreased with emissions at 29 grams per EUR earned in 2019, as opposed to 32 grams in 2018. The report also finds that, by end 2019, 50% of the energy used by ETNO companies came to renewable sources. What is more, some telecom leaders have bold emission targets, which currently appear more aggressive than the announced EU plans.

Digital services, IoT, Cloud and AI: a major opportunity

The report also identifies areas in which telecoms have an opportunity to offer a European alternative to consumers, including in the field of trusted AI, cloud and data-based services. Projections also indicate further growth in the area of IoT, with 740 million active IoT connections in Europe by 2026. Similarly, by 2024, telecom revenues from OTT video services are expected to expand to €5.5bn/year, up from €1.8bn/year today.

Regulation should support EU innovation and investment

As Europe strives for asserting global digital leadership, the role of regulation appears to be particularly important. On the implementation side, a pro-investment application of the EECC appears crucial to boost fibre roll-out. Similarly, spectrum auctions are in the spotlight as to accelerating 5G roll-out. So far, some countries appear to have charged punitive spectrum fees, with the total price tag for 5G spectrum auctions already expected to reach a total of €39.4bn.

Lise Fuhr, ETNO Director General, said: “ETNO shares President von der Leyen’s ambition to make Europe a global digital leader. This report shows that there is a strong case for supporting investment in 5G and fibre, and for creating more space for EU innovation in AI and data. We look forward to working with Commissioner Breton and EVP Vestager in achieving a stronger digital Europe”.

Rupert Wood, Research Director, Analysys Mason, said: “Fit-for-purpose digital infrastructure could deliver significant economic, societal and environmental benefits for Europeans. However, investment per capita in fibre and 5G is being held back. We observe that, by global standards, European telecoms investment and telecoms-specific taxation is high in relation to revenue, but the prices consumers pay are ultra-low”.

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About ETNO

ETNO is the European Telecommunications Network Operators’ Association. We proudly represent Europe’s main telecom operators, who innovate and invest in the continent's digital backbone. Our companies are the providers of Europe's most advanced digital networks and services. ETNO's mission is to develop a positive policy and regulatory environment empowering the delivery of world-class services for European citizens and businesses.